Female Angel Investing Overview
What is a female angel investor?
The term “angel investor” originated in the early 1900s -referred to wealthy investors who invested in Broadway theatrical productions. Today, the term typically refers to high-net worth individuals or accredited investors* that invest in early-stage, private companies .
*SEC accredited investor definition –net worth of $1M excluding primary residence or income of $200k ($300k with spouse)
Who Is The Typical Angel?
Vary in background, Level of investment expertise, Professional Experience
Accredited investors –high net worth or income
$200K single, $300K married, or $1M net-worth (less primary residence)
Able to invest their own money into debt or equity deals
What Type of Company Might Female Angels Invest In?
- Company is not sufficiently developed to stand on its own –still burning cash & not profitable.
- Novel business concept often associated with an emerging market.
- Products may be new and/or under development & still subject to technical & market risks.
- The business may need both additional funding & mentoring to grow to the next stage of development.
What Do Angels Want in an Investment?
- Typically seed or early stage companies
- Large market opportunity with scaleable growth
- Compelling strategy for gaining market share
- Proprietary technology or other barriers to entry
- Strong management team open to coaching
- Opportunities they can identify with/understand
- Reasonable Valuation & Credible exit strategy
- Exceptional opportunities for high return on investment
Why Become an Female Angel Investor?
- Stay engaged –using skills & experiences to help build a business
- An active form of investing –not just watching the markets
- An interest in mentoring the next generation of high impact entrepreneurs -create jobs & wealth
- Motivation can be both financial and/or altruistic
- Return on investment motivates all investors
How Venture Capital Differs From Female Angels
- Venture capital firms are professional managers of risk capital
- Typical investors are endowments, foundations, ultra high net worth persons, insurance companies, etc.
- VCs invest as a fund vs. investing individually
- The average venture capital fund: $135M
- Often look to invest $5-$8M in a given company
Female Angel Investing -Part of Alternative Assets
Most wealth managers believe “alternative investments” are a necessary part of any healthy portfolio allocation plan
The alternatives category includes:
Angel investing is a form of private equity
Angel Investor Return Targets
- Many angels target 10X ROI (cash-on-cash) or more
- Typical timeframe of 5 to 7 years
- Annualized rate of return between 40% & 60%
- Require higher returns because of high risk
Some Truths About Angel Investing
- Smart investors are aware of their inability to pick only winners
- Investing in startups is a numbers game as most startups fail
- In general, out of 10 companies: 2 wildly succeed, 4 die slowly, 4 die violent deaths
- Successful companies will need follow-on investment
Source: Angel Investing –David S. Rose
Determining Your Return As a Female Angel Investor
How much money you make from angel investing is determined in large part by:
• Value of the company when you invest
• Terms of the deal
• Value of the company when you sell
• Number of years it takes to sell
• It is estimated that 40% or more of deals fail to secure funding due to a failure to agree on valuation
Source: Angel Investing –David S. Rose
What Many Individual Female Angels Do
- Go out and find a company of interest
- Invest in unvetted deals with too high valuations
- Write a check (sometimes a really big check)
- Don’t reserve follow on capital
- Invest in too few deals
- Invest without a long-term mindset
- Quit investing in the category after losing money
The Better Female Angel Investing Model
- Join an angel group -Work together to find promising companies
- Camaraderie and shared ideas/Consistent Deal Flow
- Conduct or have access to thorough due diligence
- Syndicate with other female angel groups – deeper pockets
- Get involved with the company post-investment
How Does a Female Angel Network Operate?
- Meet regularly to review investment opportunities
- Invest individually or through a pool or fund
- Provide capital in the $250K-$400K range
Director of Angel Investments | Venture Advisor
Female Angel Investors Network
Web Site: www.FemaleAngelInvestor.com